New way to make sense of pensions jargon
Guest blogger Tim Jones, chief executive of the new, not-for-profit pension scheme NEST, discusses its mission to bust pensions jargon.
Pensions jargon isn’t just confusing - it’s one of the reasons people give for not saving for retirement.
Recent research carried out for NEST ( he National Employment Savings Trust) by YouGov showed that one in three people are put off thinking about saving for retirement because they find pensions confusing. This is a worrying finding, particularly when later this year millions of workers are due to start saving for their retirement for the first time through big changes to workplace pensions.
The age of auto-enrolment
Starting in October people across the UK will have new rights which mean their employer has to enrol them into a pension scheme that meets certain minimum standards and make contributions on their behalf. The Government will also add tax relief to the money you pay – so, for example, if you pay in £40 to your retirement pot each month, £10 would be added through tax relief. Your employer would pay in £30, giving a total monthly contribution of £80.
NEST is the UK’s new national workplace pension scheme that’s designed for people who are largely new to pensions and saving, and the organisations that employ them. We’re the only UK pension scheme that has a public service obligation to say ‘yes’ to any employer that wants to use us. We’re also run on a not-for-profit basis, with no shareholders, and have a legal duty to act in our members’ interests.
Clear and easy communication
It’s expected that NEST will have millions of members and we want to make sure the way we communicate with them is clear, easy to understand and helps them feel confident about saving for their retirement.
Now we’re certainly not the first to point out that pensions aren’t renowned for jargon-free communications, but what NEST has done is carry out wide-ranging research with people who are new to pensions and saving. Thanks to that research, we've been able to construct a phrasebook, highlighting the most mystifying words and explaining what they mean.
The phrasebook features a list of user-friendly terms and phrases we believe will work better than existing jargon for savers because they’ve been designed with and for them.
A pensions industry favourite ‘annuity’ becomes ‘retirement income.’ Our research indicated that we should also add a description of ‘a regular income stream for the rest of your life’.
Another piece of jargon not likely to roll off anyone’s tongue is ‘trivial commutation’. In the phrasebook, this simply becomes ‘taking your retirement pot as cash’. People with NEST retirement pots worth less than £2,000 or with total retirement savings of less than £18,000 might be able to take this money as a cash lump sum instead of buying a retirement income.
We’ve also taken a light-hearted look at how pensions jargon like vesting, open market option and crystallisation could be interpreted if you look at terms from ‘non-pensions geek’ perspective, creating a series of videos by NEST people and pensions journalists on our YouTube channel.
NEST will continue to develop and add to our phrasebook. We’re committed to talking about pensions in language that people understand, helping to make it easier for them to keep saving for their retirement.
If there are any pension jargon terms you’d like to highlight to NEST, why don’t you include them in your comments below and we’ll consider adding them into our ongoing jargon-busting research?